The State Bank of Pakistan (SBP) on Tuesday said the recent depreciation of the rupee against the U.S. dollar is a “feature of a market-determined exchange rate,” adding that daily fluctuations were a result of several factors, including the current account position, domestic uncertainty and daily news.
In a series of posts on Twitter, the central bank stressed that the ongoing slide of the national currency was “in large part a global phenomenon.” Noting that the U.S. dollar had surged by 12 percent in the past six months to a 20-year high, it said this was a result of the U.S. Federal Reserve “aggressively” raising its interest rates to combat inflation.
“Like most advanced and emerging market currencies in the world, the rupee has depreciated against the U.S. dollar since December 2021. It has depreciated by 18 percent over this period,” it added. “In real effective terms—i.e. against a basket of currencies in which Pakistan trades and adjusting for inflation—depreciation in the rupee since December 2021 has only been 3%. This is a better measure of the strength and competitiveness of a currency than the U.S. dollar rate,” it added.
The central bank’s statement follows the Pakistani rupee hitting an all-time low of Rs. 224 to the dollar in the interbank market earlier on Tuesday, before closing at 221.99. On Wednesday morning, the slide continued, with the rupee trading at Rs. 225 in the interbank market and Rs. 227.5 in the open market. Overall, since the start of this week, the rupee has dropped against the dollar by over 14.